Elon Musk is right to pay much less for Twitter, experts say
- Elon Musk continues to delay his $44 billion Twitter deal over the number of bots on the platform.
- The founder of social media app MeWe told Insider that $23 billion was a fairer price to pay.
- A Wedbush analyst said Musk had two options: renegotiate or use it as an excuse to pull the plug.
Elon Musk’s $44 billion acquisition of Twitter continues to be in play after the CEO of Starlink and Tesla put the deal on hold pending confirmation of the number of bots on the platform -form.
Last weekend, his rhetoric escalated, first calling Twitter’s lack of clarity on how the company calculated the 5% bot figure “highly suspicious.” He then accepted a comment suggesting that if 25% of Twitter users were bots, the deal to buy the platform would have to cost 25% less, resulting in a potential $11 billion cut on the selling price.
As Musk’s scrutiny mounts and his other companies lose value, the billionaire is under pressure to make a decision on takeover before his net worth drops even further. Experts say he has two options: renegotiate the deal or walk away altogether.
How many bots are there on Twitter?
Twitter’s official estimate is that less than 5% of its 229 million monetizable daily active users are automated robots.
But most experts have argued that it is very difficult to quantify the number of bots on Twitter, with Kai-Cheng Yang and Filippo Menczer arguing in The conversation that the definition of a bot is disputed and that the argument misses the point because it ignores the experiences of different users.
The number of actual active users has implications for the final price of a transaction.
Mark Weinstein, founder of MeWe, a “freemium” social networking app with 20 million users, told Insider that advertisers give money to Twitter on the basis that they market to humans. If millions of users are in fact bots, then Twitter would be worth less, he said.
“If it were proven that 25% of [users] were actually bots, then advertisers would charge a lower rate if Twitter was unable to filter them out,” Weinstein said.
Will Musk benefit from his 25% discount?
Weinstein argued that a fair price for Twitter was closer to $23 billion. He’s not the only one who thinks the current deal is overpriced.
“There is clearly an argument that his offer is inflated,” Weinstein said. “And maybe that should be adjusted to reflect the [user] the reality of income and the calculation of value based on that.”
In a recent research note, Wedbush analyst Dan Ives said the $54.20 per share bid was “out the window” as scrutiny of bot counts increased. But if a new price cannot be negotiated, Musk will be forced to pay $1 billion in severance pay.
“We believe there is currently a 60% chance that Musk will try to walk away and use this spam account issue as a scapegoat to get out of the deal and a 40% chance that the Twitter board and Musk reach a new price in the coming weeks,” Ives said.
This new deal, Ives said, would be somewhere closer to the $40 per share average — a steep discount that would bring Musk closer to his 25% discount request.
However, Ives said Musk needed to hurry before Tesla and Starlink shares fall again: “Musk faces a fork in the road situation in which he must decide his next step on this soap opera as the patience of Tesla investors are running out.”
Twitter declined to comment.